How did stocks trade?

• The Dow Jones Industrial Average
  DJIA,
  +1.00%
  fell 55.69 points, or 0.2%, to close at 33,618.69.

• The S&P 500
  SPX,
  +1.30%
  rose 1.87 points, or less than 0.1%, to end at 4,138.12.

• The Nasdaq Composite
  COMP,
  +2.19%
  eked out a gain of 21.5 points, or 0.2%, finishing at 12,256.91. The advance left the tech-heavy index up 20.01% from its 52-week low of 10,213.29 set on Dec. 28. An asset is said to exit a bear market when it rises 20% from a recent low.

On Friday, the Dow rose 546.64 points, or 1.7%, as stocks rallied following April jobs data. But the Dow and S&P 500 still suffered weekly losses, while the Nasdaq Composite eked out a gain.

Read: Are we in the beginning of a new bull market? The odds are against it.

What’s driving markets?

Investors parsed a quarterly Federal Reserve survey of senior loan officers released Monday afternoon for signs that regional-bank woes, alongside the Fed’s aggressive monetary tightening over the last 14 months, have started to translate into a credit crunch.

Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms as well as to small firms during the first quarter, the Fed reported. Meanwhile, banks saw tighter standards and weaker demand for all commercial real-estate loan categories.

See: Fed lending survey has perfect track record when it comes to foreshadowing recessions: strategist

For loans to households, banks reported that lending standards tightened across all categories of residential real-estate loans other than government-sponsored enterprise-eligible and government residential mortgages, which were largely unchanged. Meanwhile, demand weakened for all residential real-estate loan categories. In addition, banks reported tighter standards and weaker demand for home-equity lines of credit. Standards tightened for all consumer loan categories, and demand weakened for automobile and other consumer loans, while it remained basically unchanged for credit cards, the Fed said.

Meanwhile, bank shares remained in the spotlight.

Shares of PacWest Bancorp
PACW,
+4.41%
rose 3.6% in choppy trading. Shares saw an 81% surge on Friday. The regional lender said late Friday that it will cut its dividend payment.

Among other bank shares, Western Alliance Bancorp.
WAL,
+0.25%
rose 0.6%, Comerica Inc.
CMA,
-0.51%
fell 0.8% and Zions Bancorp
ZION,
+1.20%
rose 2.1% after registering strong early gains. The SPDR S&P Regional Banking ETF
KRE,
+1.23%
declined 2%.

Get in the know: Five regional banks and an ETF that are ready to soar, says Fundstrat

“Investors have been isolating the recent banking stress as a one-off event. While we don’t expect the recent banking issues to become systemic, credit availability will tighten,” said Richard Saperstein, chief investment officer of Treasury Partners, a New York-based investment firm with $9 billion in assets under management.

“We have yet to wring out the excesses of a decade of easy money, and the banking stress is emblematic of the breakage that has started to occur following the Fed’s steep pace of rate hikes over the past year,” he said in emailed comments.

The Federal Reserve signaled it may hold rates steady at its next policy meeting after delivering a 10th straight increase last week, though the outcome will be determined by incoming data. Fed-funds-futures markets have priced in rate cuts by year-end, though Fed Chair Jerome Powell last week said cuts would be inappropriate given the central bank’s inflation outlook.

Analysts said stock-market investors may be overly optimistic on the prospect for easing by the Fed.

Labor-market data looks “too hot” to justify a further dovish shift in Fed policy, said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a Monday note. Inflation, though moderating, remains too high for comfort, he said, while stock-market valuations are pricing in “too rosy” an outcome for the economy.

“We are least preferred on equities overall and see greater upside in fixed income, especially high-quality government bonds where there is scope for capital gains in the event of an economic downturn,” Haefele wrote. “Given elevated valuations, we also recommend investors diversify beyond the U.S. market and growth sectors.”

Stock Market Today: Do stock-market investors really want Fed rate cuts? ‘Be careful what you wish for’: Principal’s Shah

Investors over the weekend heard from billionaire investor Warren Buffett on a range of topics, including his frustration over the regional-banking woes, his thoughts on hype over artificial intelligence, and succession issues at Berkshire Hathaway Inc.’s
BRK.A,
+0.55%

BRK.B,
+0.50%
annual meeting in Omaha.

And: Warren Buffett weighs in on bank woes, AI, oil, Apple and other hot topics: live blog recap

Berkshire early Saturday reported that operating profit after taxes rose 12.6% to $8.1 billion in the first quarter on higher investment income and increased insurance profit. Berkshire Class A shares rose 1%.

The big data spotlight for the week will be on Wednesday’s April consumer-price index, with producer prices and a consumer-sentiment survey also coming this week.

And investors will continue to watch the debt-ceiling drama on Capitol Hill. Treasury Secretary Janet Yellen said Sunday there were “no good options” to avoid an economic “calamity” if Congress fails to raise the nation’s borrowing limit in the coming weeks.

Also read: PayPal seems on track to ‘clear a low bar.’ Is that enough to help its stock?

And: Big Tech has made earnings look better, but here come Disney and PayPal

Companies in focus

• Dish Network Corp.
  DISH,
  -0.15%
  reported a bigger-than-expected revenue decline, but shares rose 2.1%.

• Shares of Zscaler Inc. 
  ZS,
  +3.10%
  jumped 20.6% after the cybersecurity company said that it expects to report better-than-anticipated results for its just-completed quarter.

• Occidental Petroleum Corp.
  OXY,
  +0.22%
  shares fell 2.9% after Buffett on Saturday said Berkshire Hathaway wouldn’t move to take full control of the oil company. Speculation around a full takeover had been on the rise as Berkshire rapidly increased its stake in Occidental.

• Tyson Foods Inc.‘s
  TSN,
  +0.48%
  stock fell 16.4% after the meat producer swung to a surprise second-quarter loss and lowered its sales guidance, hurt by charges stemming from plant closures and job cuts as well as weak demand for meat.